The Australian Competition and Consumer Commission (ACCC) announced on 8 November it would not seek to block the proposed merger between Nine Entertainment and Fairfax Media.
Under the Competition and Consumer Act 2010, a merger is prohibited if it would have the effect, or be likely to have the effect, of substantially lessening competition in a market.
Plans for the A$4 billion deal were announced in July 2018 and sparked intense discussion over the future of the Australian media landscape.
While the ACCC concluded that the proposed merger would likely reduce competition, it also found that the planned merger was not likely to substantially lessen competition in any market and thus was not prohibited by the legislation.
The ACCC had not been expected to oppose the merger. New media ownership laws facilitating such acquisitions were introduced by then Australian Prime Minister Malcolm Turnbull in September 2017.
Paul Keating calls ACCC decision to approve Nine Fairfax takeover 'appalling' https://t.co/8AwD34DtIB
— Lenore Taylor (@lenoretaylor) November 8, 2018
Paul Keating on the decision: “This will poison quality journalism”
The watchdog’s decision has been slammed by former Prime Minister Paul Keating as “appalling”.
“What the ACCC has done today is effectively skewer major source media diversity in Australia,” Keating said in a statement.
“A low-rent news organisation, Channel Nine, will have editorial command of the major print mastheads in the country.
“This will poison quality journalism; but more than that, remove chunks of local specific political issues, normally covered by newspapers, from the political debate.”
The Media, Entertainment and Arts Alliance also lambasted the decision, calling it “a body-blow to media diversity, and the forerunner to future mega-deals that will reduce coverage of matters of public and national interest and do untold harm to media jobs.”
The legality of mergers largely turns on market definition. In this instance, the ACCC considered the likely effect of the intended merger in a number of markets. The commission also consulted with hundreds of stakeholders and read more than 1,000 submissions in addition to internal documents it compelled both parties to produce.
The competition watchdog will allow Fairfax Media’s $4 billion merger with Nine Entertainment to go ahead. https://t.co/EgePMbnqC7
— The West Australian (@westaustralian) November 7, 2018
Smaller online media players have entered the market
In a statement, ACCC Chair Rod Sims said consideration of the merger had involved some complex issues.
“This merger can be seen to reduce the number of companies intensely focusing on Australian news from five to four. Post the merger, only Nine-Fairfax, News/Sky, Seven West Media and the ABC/SBS will employ a large number of journalists focussed on news creation and dissemination.
“With the growth in online news, however, many other players, albeit smaller, now provide some degree of competitive constraint. These include, for example, The Guardian, The New Daily, Buzzfeed, Crikey and The Daily Mail.
“While there are important barriers to building trust and scale, significant new entry into the Australian online news market has already occurred and made a noticeable difference. Due to the difficulties in monetising journalism online, however, it is hard to predict the future landscape with any certainty.”
The ACCC also concluded that Nine’s television programming and Fairfax’s main media assets in print and online did not generally compete closely with each other. It found that Nine’s news and current affairs output was targeted at a mass market audience that could be differentiated from Fairfax subscribers, who generally sought more in-depth coverage.
News: ACCC will not oppose Nine-Fairfax merger https://t.co/CPAkN8AecW
— ACCC (@acccgovau) November 7, 2018
Many of the submissions had reportedly expressed concerns that Fairfax’s investment in investigative journalism would decline after the proposed merger. In its statement, the ACCC said it “understood these concerns” but did not go into greater detail on the issue.
Sims also said that the highly dynamic nature of the market made forecasting how the proposed merger would impact on any market complicated.
In the wake of the news of the proposed acquisition, IBISWorld Senior Industry Analyst Andrew Ledovskikh told The CEO Magazine that it would be in Nine’s commercial interests to preserve the prestige of the Fairfax brand as much as possible.
Nine CEO Hugh Marks said he welcomed the ACCC’s decision. “It is a clear acknowledgement of the changing competitive landscape in our industry, where the ability to compete across a variety of platforms and to engage different audiences is key,” he said.
Fairfax shareholders will now have the chance to vote on the merger on 19 November.
The merger is scheduled to be finalised by 7 December, with Fairfax set to be delisted from the Australian Stock Exchange.